Life after school....what's next?

Written by Engel & Völkers on 29.10.2014

School's out! What's next for those finishing school?

You have graduated...now what?

With the winter safely behind us and summer in full bloom we realise that our matric students are on their final journey of their schooling career. “It is with great excitement and anticipation that they have applied to tertiary institutions where they can follow their much considered career paths, and are anxiously awaiting the institution to advise them whether they have been accepted or not, says Wendy Williams, one of the Directors of Engel & Völkers Southern Africa.

Wherever they end up studying, the main concern, after the exorbitant study fees paid to the learning institution, is where they should stay. Parents are usually comfortable with the idea that their child stays in the residential accommodation provided on campus at a relatively acceptable cost, but many students feel they are better suited to have their own student flat. At this point family budgets are poured over and scrutinised, and a very important financial decision needs to be taken by the parents. Can they afford to buy a student flat? Should they rather rent accommodation for the duration of their child (or children's) studies? Is there another alternative?

It certainly makes financial sense if at all possible, to rather invest in your own property than renting for a few years, where-after you have nothing to show for this vast cash outlay. However, many considerations need to be made to validate your final decision. By working with an established and experienced real estate company, they will advise you on the average rental per month versus your investment in purchasing a suitable property.

Wendy mentions that a major factor in deciding on a property would be to establish which location would be the most convenient for access to the campus for your child, and then determine whether an investment in that particular area would be better than renting. With their local knowledge in every student town, our Engel & Völkers' sales advisors will be able to accurately advise you on the growth potential in the specific suburb in which you are considering buying.

So many choices....

Should you decide to invest in a property, the two most important factors to consider would be the location and price. Determine your personal budget that you are able to afford before you even start looking for a suitable property. Location should be determined by factors such as public transport, recreational facilities and of course security must always be factored in, so an outlying area is probably not a good choice. The distance of the property from the campus affects the price of the property as well, so make sure you are aware of this fact in the town you are buying in.

When determining your budget whether to rent or to buy, remember to tally all the monthly living expenses, utility costs and transport expenses, and then rent or buy according to what you can afford. Add to this the monthly bond repayment costs if you are financing the property and also factor in potential increases in bond repayments over the period that your children will be at varsity and also increases in levies and municipal charges. You will then get a true reflection of the exact monthly costs of an owned property compared to a rented unit.

Although you may have only one child, always remember that if you invest in a bigger apartment, you could rent out the additional bedrooms to other students, which will help pay off the monthly bond and cover other expenses too. There are always thousands of students each year looking for rental accommodation, so if your property is in a well situated and safe environment, you will always find tenants. Furthermore, if you have other children still at school, they also will be able to enjoy the benefit of your investment when they eventually arrive at this tertiary institution. Once your own children have finished their studies, our Engel & Völkers sales advisors would be your ideal partners to continue renting out your property to give you a continuous income on your investment. Property is one of the few investments that yield a return whilst at the same time, giving you a capital gain in value.

How to start building your success

If you decide to rather rent accommodation for your child, you can contact any of the Engel & Völkers offices to assist you in acquiring the best suited residence. Carl Venter, licence partner of Engel & Völkers Potchefstroom comments “At Engel & Völkers we appreciate that the task of hunting for rental properties can be tedious and daunting, and that is where our trained Property Rental Advisors can simplify the process and assist students in finding a suitable property to rent. We have built up an extensive rental portfolio in Potchefstroom – and somewhere in our vast portfolio there is a property that will suit your exact needs.

By renting a property through a reputable and registered real estate franchise company, you are assured that the agreement you sign has been vetted by the agency to comply with the latest rental legislation, the CPA, and that the building is well managed and maintained - definite peace of mind for parents to know their children are protected from unsavoury landlords.

According to Johan Swart, Tax Manager at Legal and tax ‘Now is the right time to get into the property market. A simple example would be the purchase of a R1 million property, generating R8 000 rental income per month, which means that your return on the investment is 9.6% per year. What's more, the property itself could be worth in excess of R1.2 million in two years' time, which translates into a capital growth of 20%. When buying an apartment, note that the smaller units appreciate the fastest in value, and also earns the best rental income in relation to the capital outlay. For example, two R1 million units will probably give a better return than one priced at R2 million. With one unit, the risk is focused and concentrated on a single tenant, but spreading one's risk between more than one property, is one of the oldest and wisest investment strategies and has always been favoured by landlords.'

Contact any one of our Engel & Völkers offices in the city where your child will be studying and they will be able to assist you with either rental opportunities or to give you financially sound choices to increase your property portfolios.